Maximizing the prfit is one of the goals every company have. This goal can be achieved by realizing more revenue. Another way to achieve it, is by reducing the company’s internal costs. Reducing the internal costs can be achieved by outsourcing a part of the procurement. The procurement is a real hidden treasure. And especially indirect procurement. By outsourcing the indirect procurement a company can save up 21% on internal costs. To know how you can outsource the indirect procurement, it’s important to know the difference between direct procurement and indirect procurement.
Direct procurement is the procurement of goods, services and raw materials which contribute directly to the company’s core business. Without these raw materials or goods, a company can’t continue with their core business. So, these raw materials, goods and services are very important for a company. Before a contract with a supplier Is signed, the company starts a tendering process and choose for the supplier with the best products, for the best price. The contracts with these suppliers are most of the time long lasting contracts with the best terms and conditions possible for both parties. Direct procurement is very important for continuing the core business of a company.
Unlike direct procurement indirect procurement is not that important for a company. That’s why indirect procurement is a real hidden treasure. Indirect procurement is the procurement of materials, goods and services which are not directly influence the core business of the company. Coffee cups are good examples of products who not influence the core business. But coffee cups are still necessary for the employees to be able to drink coffee at the office. Because these supplies are less important, it’s not that high on the company’s agenda. Most of the time the company won’t even start a tendering process and search for the best prices and conditions. After one or two orders, the company doesn’t do any business with this supplier again.
Outsource the indirect procurement
To save on internal costs a lot of multinational companies choose to outsource the indirect procurement. Instead of all those single invoices from different suppliers with each their own payment terms, a company can choose to outsource the invoice management. They will only receive one total invoice every month. This will reduce the supplier base extremely. Sometimes even up to 80%. Besides outsourcing the invoice management, a company can outsource more parts of the procurement process. With source to pay a company choose to outsource the tendering and selection process to a specialized company. This specialized company will search for the suppliers with the best prices and conditions after selecting the right supplier, this company will guard the delivery process and will pay the invoice from each single supplier. Once a month this company will send a total invoice. This will unburden the finance and procurement departments. Finding the best prices can save the company up to 21% on internal costs.
Infographic Created By Corcentric, Supporting Your Business Goals With Managed Accounts Receivable